Not upheld: Section 75 Consumer Credit Act claim - technical invalidity of debtor-creditor-supplier agreement complaint against Tesco Personal Finance Limited

Decision detail

Summary

Mrs J purchased timeshare membership for £15,700 in April 2015 using a credit card from Tesco Personal Finance Limited and later made a Section 75 claim alleging misrepresentation or breach of contract. The lender rejected the claim, and the ombudsman upheld this rejection on technical grounds. The payment was made to a trustee company rather than directly to the supplier, which meant no valid debtor-creditor-supplier agreement existed under the Consumer Credit Act 1974. The High Court judgment in Steiner v. National Westminster Bank Plc established that such third-party trustee arrangements do not satisfy the requirements for a Section 75 claim, and Mrs J's case presented substantially similar circumstances.

The Ombudsman's reasoning

For a valid Section 75 claim under the Consumer Credit Act 1974, a valid debtor-creditor-supplier agreement must exist, which requires the credit card payment to be made directly to the supplier. In this case, the payment was made to a trustee company acting on behalf of the supplier, not directly to the supplier. The High Court judgment in Steiner established that payment through a third-party trustee outside the credit card network does not constitute a valid DCS agreement. The circumstances in Mrs J's case are substantially similar to Steiner, including the same trustee company and similar timeshare arrangements. Therefore, no valid Section 75 claim could be pursued.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website